A-46423, A-58410, JULY 23, 1935, 15 COMP. GEN. 58

A-46423, A-58410, JULY 23, 1935, 15 COMP. GEN. 58

CONTRACTS - DAMAGES - AVAILABILITY OF APPROPRIATIONS THERE BEING NO JURISDICTION IN ADMINISTRATIVE OFFICERS TO CONSIDER AND RECOMMEND EITHER FAVORABLY OR ADVERSELY THE PAYMENT OF CLAIMS FOR WHICH THERE EXISTS NO AVAILABLE APPROPRIATION, THE VETERANS' ADMINISTRATION IS NOT AUTHORIZED TO CONSIDER AND DETERMINE UNDER THE TERMS OF A CONTRACT PROVIDING FOR THE CONSTRUCTION OF A HOSPITAL, OR OTHERWISE, THE CLAIM FOR ALLEGED DAMAGES BY REASON OF DELAYS CAUSED BY THE GOVERNMENT IN THE PERFORMANCE OF THE CONTRACT, FOR PAYMENT OF WHICH THERE APPEARS NO PROVISION IN THE CONTRACT NOR IN THE APPROPRIATION ACT SOUGHT TO BE CHARGED.

COMPTROLLER GENERAL MCCARL TO THE ADMINISTRATOR OF VETERANS' AFFAIRS, JULY 23, 1935:

THERE HAS BEEN RECEIVED YOUR LETTER OF MAY 1, 1935, AS FOLLOWS:

ON NOVEMBER 17, 1934, I FORWARDED TO YOU A LETTER FROM WHICH THE FOLLOWING IS QUOTED:

"I AM SUBMITTING HEREWITH FOR SETTLEMENT BY YOUR OFFICE VOUCHERS IN FAVOR OF THE HERBERT M. BARUCH CORPORATION, COVERING THE 18TH PARTIAL PAYMENT AND THE 19TH FINAL PAYMENT, STATED IN THE SUMS OF $82,602.35 AND $11,600, RESPECTIVELY, FOR WORK PERFORMED UNDER CONTRACT VAC-336, DATED JANUARY 12, 1933, FOR CONSTRUCTION OF BUILDINGS AND UTILITIES AT VETERANS' ADMINISTRATION FACILITY, SAN FRANCISCO, CALIFORNIA. THESE VOUCHERS ARE ACCOMPANIED BY STATEMENT OF ACCOUNT WITH THE CONTRACTOR SHOWING CHANGE ORDERS MADE UNDER THE CONTRACT AND OTHER PERTINENT DATA. THE WORK UNDER THIS CONTRACT WAS COMPLETED AUGUST 24, 1934, AND BY DECISION OF THE SECRETARY OF LABOR DATED OCTOBER 24, 1934 (COPY ATTACHED), IT IS INDICATED THAT LABORERS AND MECHANICS EMPLOYED ON THE WORK WERE NOT PAID LOCAL PREVAILING WAGES AS PROVIDED BY THE DAVIS BACON ACT (ACT OF MARCH 3, 1931- -- 46 STAT. 1494). THE DECISION OF THE SECRETARY OF LABOR IS STATED TO BE "EFFECTIVE AS OF NOVEMBER 10, 1933" AND IN VIEW OF THE CIRCUMSTANCES IT IS CONSIDERED DOUBTFUL EITHER THAT THE VETERANS' ADMINISTRATION CAN PROPERLY STATE THAT THE WORK WAS COMPLETED IN ACCORDANCE WITH THE CONTRACT OR THAT IT CAN MAKE ANY FURTHER PAYMENTS UNDER THE CONTRACT UNTIL THE MATTER HAS BEEN PASSED UPON BY YOUR OFFICE. * * *"

EACH OF THE ABOVE-MENTIONED ITEMS WAS ALLOWED BY YOUR OFFICE AND PAYMENT OF THE TOTAL, $94,202.35, WAS MADE BY CHECK DATED JANUARY 26, 1935. (SEE VOUCHER NO. 931877; SETTLEMENT CERTIFICATE NO. 0348458.)

ON SEPTEMBER 6, 1934, THE HERBERT M. BARUCH CORPORATION BY PAUL M. NEAL, FORWARDED A LETTER ADDRESSED TO DIRECTOR OF CONSTRUCTION, VETERANS' ADMINISTRATION, ARLINGTON BUILDING, WASHINGTON, D.C., OF WHICH THE FOLLOWING IS A COPY:

"WE SUBMIT HEREWITH THREE SIGNED COPIES OF OUR PROPOSAL FOR THE COST OF THE 116-DAY GOVERNMENTAL DELAY, DATED JULY 19, 1934, IN ACCORDANCE WITH JOB MEMORANDUM NO. 232 OF YOUR SUPERINTENDENT OF CONSTRUCTION, DATED SEPTEMBER 4, 1934.'

ONE OF THE 3 SIGNED COPIES OF THE PROPOSAL REFERRED TO IN THE ABOVE QUOTED LETTER IS ENCLOSED HEREWITH.

ON SEPTEMBER 14, 1934, THE DIRECTOR OF CONSTRUCTION REPLIED AS FOLLOWS:

"REFERENCE IS MADE TO PREVIOUS CORRESPONDENCE AND TO YOUR LETTER OF SEPTEMBER 6, 1934, MAKING CLAIM IN AMOUNT $58,928.52 FOR WHAT YOU STATE TO BE YOUR COST "OF THE 116-DAY GOVERNMENTAL DELAY" IN CONNECTION WITH YOUR CONTRACT FOR CONSTRUCTION WORK AT THE VETERANS' ADMINISTRATION FACILITY, FORT MILEY, SAN FRANCISCO, CALIFORNIA.

"THE CONTRACT, WHILE PROVIDING THAT YOU WOULD NOT BE CHARGED LIQUIDATED DAMAGES FOR DELAYS DUE TO CERTAIN UNFORESEEABLE CAUSES BEYOND THE CONTROL AND WITHOUT FAULT OR NEGLIGENCE OF THE CONTRACTOR, MAKES NO PROVISION FOR THE PAYMENT BY THE GOVERNMENT OF DAMAGES CAUSED BY SUCH DELAYS, AND IN THE ABSENCE OF SUCH A PROVISION, PAYMENT OF THE AMOUNT ASKED IN ADDITION TO THE CONTRACT PRICE IS CONSIDERED BY ME TO BE UNAUTHORIZED. IF IT IS YOUR DESIRE TO APPEAL TO THE HEAD OF THE DEPARTMENT FROM THIS DECISION SUCH APPEAL SHOULD BE MADE BY YOU DIRECT.

"IT IS NOTED FROM A REVIEW OF THE FILES IN THIS CASE THAT BY LETTER OF AUGUST 29, 1934, YOU WERE ADVISED THAT "SINCE THERE IS NOTHING IN THE CONTRACT WHICH AUTHORIZES THIS OFFICE TO APPROVE THE PAYMENT OF THIS CLAIM, IT WILL BE TRANSMITTED TO THE GENERAL ACCOUNTING OFFICE, TOGETHER WITH AN ADMINISTRATIVE REPORT COVERING THE FACTS FOR DIRECT SETTLEMENT.' INASMUCH AS IT WOULD APPEAR FROM THE WORDING OF THIS LETTER THAT YOUR CLAIM WOULD BE SUBMITTED BY THIS OFFICE TO THE GENERAL ACCOUNTING OFFICE WITHOUT AFFORDING YOU AN OPPORTUNITY TO APPEAL TO THE HEAD OF THE DEPARTMENT SUCH LETTER WAS IN ERROR AND SHOULD BE DISREGARDED BY YOU.'

BY LETTER DATED SEPTEMBER 20, 1934, NOTICE OF APPEAL ON BEHALF OF THE HERBERT M. BARUCH CORPORATION WAS FILED BY MR. M. WALTON HENDRY, ATTORNEY AND COUNSELLOR AT LAW, EVANS BUILDING, WASHINGTON, D.C. A PHOTOSTAT OF SAID LETTER IS ENCLOSED HEREWITH.

ON OCTOBER 15, 1934, I FORWARDED TO MR. HENDRY A REPLY READING AS FOLLOWS:

"FURTHER REFERENCE IS MADE TO YOUR LETTER OF SEPTEMBER 20, 1934, APPEALING FROM THE DECISION OF THE DIRECTOR OF CONSTRUCTION, DATED SEPTEMBER 14, 1934, UPON THE CLAIM OF THE HERBERT M. BARUCH CORPORATION IN AMOUNT $58,928.52 FOR WHAT THE CONTRACTOR STATES TO BE ITS COST "OF THE 116 DAY GOVERNMENTAL DELAY" IN CONNECTION WITH ITS CONTRACT FOR CONSTRUCTION WORK AT VETERANS' ADMINISTRATION FACILITY, FORT MILEY, SAN FRANCISCO, CALIFORNIA.

"THE CLAIM IN QUESTION HAS RECEIVED CAREFUL CONSIDERATION, BUT THE NATURE OF THE CLAIM IS SUCH THAT I BELIEVE IT SHOULD BE CONSIDERED BY THE COMPTROLLER GENERAL. ACCORDINGLY, THE MATTER IS BEING REFERRED TO HIM.'

A PHOTOSTAT OF MR. HENDRY'S REPLY DATED OCTOBER 15, 1934, IS ENCLOSED HEREWITH.

SHORTLY AFTER THE RECEIPT OF THE LETTER LAST ABOVE CITED, MR. HENDRY CALLED PERSONALLY AT CENTRAL OFFICE, STATED THAT ANOTHER CLAIM FILED BY HERBERT M. BARUCH CORPORATION WAS PENDING IN YOUR OFFICE (COVERED BY VOUCHER NO. 931877, SUPRA) AND REQUESTED THAT NO ACTION BE TAKEN ON THE INSTANT CLAIM PENDING FURTHER WORD FROM HIM. HE CALLED AT CENTRAL OFFICE FEBRUARY 25, 1935, AND VERBALLY REQUESTED THAT FURTHER ACTION BE TAKEN.

ON APRIL 14, 1933, MR. L. W. DOUGLAS, THEN DIRECTOR OF THE BUREAU OF THE BUDGET, FORWARDED TO ME A LETTER OF WHICH THE FOLLOWING IS A COPY:

"IT HAS COME TO MY ATTENTION THAT THE NEW HOSPITAL WHICH IS UNDER CONTRACT AT SAN FRANCISCO IS NOT YET BEYOND THE STAGE OF EXCAVATION.

"I UNDERSTAND THAT, UNDER THE NEW REGULATIONS, ADDITIONAL FACILITIES WILL NOT BE REQUIRED, AND THAT THEREFORE WHATEVER CAN BE AVOIDED IN THIS PROJECTED EXPENDITURE OF $1,200,000 WOULD BE A CLEAR SAVING.

"UNDER THESE CIRCUMSTANCES, I SUGGEST THAT THE CONTRACT SHOULD BE CANCELED. CERTAINLY THE AMOUNT OF DAMAGES WHICH THEREBY WOULD ACCRUE TO THE CONTRACTOR WOULD BE FAR LESS THAN THE EXPENDITURE OTHERWISE.

"I IMAGINE THERE WILL BE OTHER SIMILAR CASES WHICH SHOULD HAVE CONSIDERATION.'

FOLLOWING THE RECEIPT OF THE ABOVE-QUOTED LETTER CORRESPONDENCE WAS HAD WITH THE FIELD IN REFERENCE TO THE PROBABLE EFFECT OF STOPPAGE OF WORK AND ON MAY 8, 1933, THE BARUCH CORPORATION WAS ADVISED BY TELEGRAM AS FOLLOWS:

"REFERENCE CONTRACT CONSTRUCTION SAN FRANCISCO, CALIFORNIA, DISCONTINUE IMMEDIATELY WORK ON ADMINISTRATION BUILDING NO. 1 STOP PREPARE AND SUBMIT THROUGH SUPERINTENDENT OF CONSTRUCTION RADCLIFFE PROPOSAL FOR OMISSION THIS BUILDING YOUR CONTRACT"

ON MAY 26, 1933, THE BARUCH CORPORATION SUBMITTED A PROPOSAL ALLOWING DEDUCTION IN AMOUNT $60,873.00 FOR OMISSION OF THIS BUILDING AND ON JUNE 6, 1933, THE ENTIRE MATTER WAS SUBMITTED TO THE FEDERAL BOARD OF HOSPITALIZATION FOR CONSIDERATION. ON JULY 18, 1933, THE PRESIDENT APPROVED THE CONTINUANCE OF CONSTRUCTION AT SAN FRANCISCO, CALIFORNIA, AND BY TELEGRAM OF JULY 27, 1933, THE BARUCH CORPORATION WAS ADVISED THAT:

"* * * IT HAS BEEN DECIDED NOT TO OMIT THIS BUILDING (ADMINISTRATION BUILDING NO. 1). PROCEED WITH WORK IN ACCORDANCE WITH ORIGINAL PLANS.'

ON APRIL 24, 1934, THE DIRECTOR OF CONSTRUCTION FORWARDED A LETTER TO THE HERBERT M. BARUCH CORPORATION OF WHICH THE FOLLOWING IS A COPY:

"UNDER CONTRACT VAC-336, DATED JANUARY 12, 1933, YOU ARE REQUIRED TO PERFORM THE GENERAL CONSTRUCTION WORK SPECIFIED FOR VETERANS' ADMINISTRATION FACILITY AT FT. MILEY, SAN FRANCISCO, CALIFORNIA, AND TO COMPLETE THE WORK WITHIN FOUR-HUNDRED TWENTY-FIVE, (425) CALENDAR DAYS AFTER FEBRUARY 3, 1933, THE DATE WHEN YOU RECEIVED NOTICE TO PROCEED, MAKING APRIL 4, 1934, THE CONTRACT DATE FOR COMPLETING THE WORK, A DATE WHICH HAS BEEN CHANGED ON ACCOUNT OF ADDITIONAL REQUIREMENTS. IT IS NOTED THAT YOUR PROGRESS WAS INTERRUPTED BY THE CONSIDERATION OF CHANGES PROPOSED BY THE GOVERNMENT AND BY CONDITIONS NOT CONTEMPLATED BY THE CONTRACT AND THAT YOUR CONTRACT WORK WILL NOT BE COMPLETED UNTIL LATER THAN THE CONTRACT DATE FOR COMPLETION.

"UNDER ARTICLE 9 OF THE CONTRACT, I HAVE ASCERTAINED THE FACTS AND EXTENT OF THIS DELAY AND FIND: (1) THAT THE CONTRACT WORK INCLUDES THE CONSTRUCTION OF A GROUP OF BUILDINGS WHICH ARE TO SERVE INDIVIDUAL PURPOSES, BUT ALL OF WHICH ARE ESSENTIAL TO THE OPERATION OF THE HOSPITAL AS A UNIT; (2) THAT OF THESE BUILDINGS THE ADMINISTRATION BUILDING NO. 1 AND THE MAIN BUILDING NO. 2 CONSTITUTE MORE THAN ONE HALF OF ALL THE CONTRACT WORK AND, BARRING POSSIBLE CONDITIONS WHICH MIGHT PREVENT THE COMPLETION OF OTHER BUILDINGS ALONG WITH THESE BUILDINGS, WOULD DETERMINE THE LENGTH OF TIME CONSUMED IN THE CONSTRUCTION OF THE HOSPITAL; (3) THAT SUBSURFACE CONDITIONS NOT CONTEMPLATED BY THE CONTRACT WERE ENCOUNTERED DURING MARCH 1933; (4) THAT YOUR FOUNDATION WORK ON BUILDING NO. 2 WAS STOPPED BY THE GOVERNMENT MARCH 21, 1933, PENDING A DECISION REGARDING THE ALTERATIONS IN FOUNDATIONS REQUIRED BY THE SUBSURFACE CONDITIONS MENTIONED, WHICH WAS NOT MADE UNTIL JULY 22, 1933; (5) THAT YOUR WORK ON ADMINISTRATION BUILDING NO. 1 WAS STOPPED BY THE GOVERNMENT MAY 8, 1933, PENDING A DECISION WHETHER THIS BUILDING SHOULD BE ELIMINATED FROM THE CONTRACT, AND THAT YOU WERE INSTRUCTED JULY 27, 1933 TO RESUME WORK ON THIS BUILDING; (6) THAT BETWEEN MARCH 21, 1933, AND JULY 27, 1933, YOUR WORK ON OTHER BUILDINGS WAS ALSO DELAYED, BUT, IN NO CASE, BEYOND JULY 27, 1933; (7) THAT YOU WERE ALLOWED TWELVE (12) CALENDAR DAYS ADDITIONAL TIME, (CHANGE ORDER "C"), FOR EXTRA ROCK EXCAVATION PERFORMED WITHIN THE PERIOD FROM MARCH 21, 1933 TO JULY 27, 1933, AND THAT THE REMAINDER OF THIS PERIOD, ONE HUNDRED SIXTEEN, (116) CALENDAR DAYS, SHOWS THE EXTENT TO WHICH YOU WERE DELAYED DURING THIS PERIOD BY THE GOVERNMENT PENDING ITS DECISIONS REGARDING THE CHANGES IN FOUNDATIONS AND THE POSSIBLE ELIMINATION OF THE ADMINISTRATION BUILDING NO. 1.'

FOR MY GUIDANCE IN TAKING ACTION UPON THE APPEAL OF THE HERBERT M. BARUCH CORPORATION FROM THE DECISION OF THE CONTRACTING OFFICER AS COVERED IN HIS ABOVE QUOTED LETTER OF SEPTEMBER 14, 1934, I SHALL APPRECIATE IT IF YOU WILL ADVISE ME WHETHER ANY PORTION OF THIS CLAIM IS OF SUCH A NATURE THAT IT MAY BE CONSIDERED AS FALLING WITHIN THE PURVIEW OF ARTICLES 3 AND 4 OF THE CONTRACT.

THE BASIC PROPOSITION IS AS PROVIDED IN SECTION 3678, REVISED STATUTES, THAT ALL SUMS APPROPRIATED FOR THE VARIOUS BRANCHES OF EXPENDITURE IN THE PUBLIC SERVICE SHALL BE APPLIED SOLELY TO THE OBJECTS FOR WHICH THEY ARE RESPECTIVELY MADE AND FOR NO OTHERS. THE ADDITIONAL AMOUNT OF $58,928.52 CLAIMED BY THE HERBERT M. BARUCH CORPORATION UNDER CONTRACT VAC-336 OF JANUARY 12, 1933, HAS BEEN CHARACTERIZED BY THE ATTORNEY FOR THE CONTRACTOR IN HIS LETTER OF SEPTEMBER 20, 1934, AS A CLAIM FOR "LOSSES AND DAMAGES" BY REASON OF ALLEGED DELAY OF 116 DAYS OF THE UNITED STATES IN CONNECTION WITH THE PERFORMANCE OF THIS CONTRACT. THE APPROPRIATIONS WHICH WERE MADE BY THE CONGRESS FOR THE CONSTRUCTION OF THE HOSPITAL BUILDINGS IN QUESTION ARE NOT AVAILABLE FOR THE PAYMENT OF "LOSSES AND DAMAGES" ALLEGED TO HAVE BEEN SUSTAINED BY THE CONTRACTOR BECAUSE OF ADMINISTRATIVE DELAYS IN COMPLETION OF THE WORK AND HENCE, THERE IS NO AUTHORITY CONFERRED ON THE ADMINISTRATOR OF VETERANS' AFFAIRS OR THE VETERANS' ADMINISTRATION TO DETERMINE THE CLAIM OF THE HERBERT M. BARUCH CORPORATION FOR $58,928.52 OR ANY PART THEREOF UNDER THE CONTRACT OF JANUARY 12, 1933.

WHILE IT MAY BE POSSIBLE THAT ADMINISTRATIVE ACTION IN CONNECTION WITH GOVERNMENT CONTRACTS MAY IMPOSE LIABILITY ON THE UNITED STATES WHICH WILL BE ENFORCED BY THE COURTS--- AS CLAIMED IN THE LETTER OF SEPTEMBER 20, 1934, FROM THE ATTORNEY IN THIS CASE--- IT IS TO BE OBSERVED THAT THE COURTS ARE NOT CONCERNED WITH THE AVAILABILITY OF APPROPRIATED MONEYS AND THAT THEIR JUDGMENTS FOR DAMAGES IN CONNECTION WITH CONTRACTS ARE REQUIRED TO BE SUBMITTED TO THE CONGRESS FOR AN APPROPRIATION BEFORE THEY MAY BE PAID. ALSO, THIS OFFICE HAS JURISDICTION UNDER THE ACT OF APRIL 10, 1928, 45 STAT. 413, TO MAKE REPORTS AND RECOMMENDATIONS TO THE CONGRESS IN PROPER CASES WHERE NO APPROPRIATIONS ARE AVAILABLE FOR THE PAYMENT OF CLAIMS. HOWEVER, NO JURISDICTION EXISTS IN ADMINISTRATIVE OFFICERS OF THE VETERANS' ADMINISTRATION TO CONSIDER AND RECOMMEND EITHER FAVORABLY OR ADVERSELY, THE PAYMENT OF CLAIMS FOR WHICH THERE EXISTS NO AVAILABLE APPROPRIATION.

ACCORDINGLY, YOU ARE ADVISED THAT UNDER THE TERMS OF THE LAW AND THE APPROPRIATION FOR THE CONSTRUCTION OF THE BUILDINGS IN QUESTION, THERE IS NO JURISDICTION AUTHORIZING THE VETERANS' ADMINISTRATION TO CONSIDER AND DETERMINE UNDER THE TERMS OF THE CONTRACT, OR OTHERWISE, THE CLAIM IN THIS CASE FOR ALLEGED DAMAGES BY REASON OF THE DELAYS CAUSED BY THE GOVERNMENT IN THE PERFORMANCE OF THE CONTRACT.